Real estate investments have three main advantages: leverage, volatility and increased return on investment.

1.  Leverage

Real estate has the power leverage where the bank will lend you money to invest. In the case of stocks, the total amount of money you invest is all that is available to bring a return.  The following example will illustrate the return on $25, 000 using a real estate investment property vs. a $25, 000 stock.

Example:
Bob purchases a house for $100, 000 using a 25% down payment ($25, 000).

Value of house appreciating at 5% per year for 5 years:
$100, 000 x 1.05% x 5 years = $127, 630
Return On Investment (R.O.I):
R.O.I = $27, 630 / $25,000 = 111% / 5 years = 22% per annum

Conclusion:
A $25, 000 stock must achieve at least 22% per year to compete with the real estate investment. If the stock drops, you’re working with less than $25, 000 (and will require a greater percentage return to just make back what was lost. Real Estate fluctuations are far less volitile than stocks. This estimate for the Real Estate investment was done at 5% appreciation and Edmonton’s average price 2005/2006 had risen 35%. )

2. Volatility

Long term holds on real estate are far safer than long term holds on stocks.  Stock investments can be a roller coaster with unexpected peaks and valleys; whereas, real estate investments are less steep and more easily forecasted. 
Have you ever seen a well maintained house depreciate a decade later? Probably not, but you’ve probably watched a stock plummet to zero worth within minutes.  How much do you value your quality of life? Real estate investment alleviates the uncertainty and unforeseen fluctuations that come with investing in stocks.

3.  Increased Return on Investment

Real Estate has 3 factors that drive up the value of Real Estate but only 1 factor that drives down the value of Real Estate therefore diversifying the risk.

Stocks only have 1 factor driving up or down its value

The three variables contributing to increased return on your investment in real estate are:

1.   Equity appreciation is key to building wealth for real estate investors,
2.   Mortgage pay down by the rental tenant, and
3.   Positive cash flow each month.  Owning five to six properties could provide substantial passive income.